Data source: UNSD, National Accounts Main Aggregates Database (NAMAD). The World Bank, World
Development Indicators.

The global financial crisis in 2008 resulted in
negative GDP growth rates in many Asian and
Pacific countries in 2009, especially those that
depend on exports. The dynamism of low and
lower middle income countries buoyed the
region and kept the regional average growth
positive at 0.5%.

GDP growth

In 2009 the full impact of the 2008 global
financial crisis hit Asian and Pacific shores with
a dramatic slowdown in GDP growth across
subregions and national economies. Growth in
the region as a whole declined from 3.1% in
2008 to 0.5% in 2009. Nevertheless the region
as a whole sustained positive growth rates with
low and lower middle income countries
exhibiting an average growth rate of 5.7% and
7.6%, respectively. The upper middle and high
income countries, however, saw a decline in GDP
of 4.8% and 3.3%, respectively; a contraction
that reflected the global impacts of North
America and Europe (growth rate of -2.6% and
-4.2%, respectively) on more developed countries
throughout the world.

Figure III.1 – Index of GDP, world regions,
1990 to 2009

The slowdown across the region was relatively
more severe in subregions that depend largely on
exports. Commodity prices fell in tandem with
the onset of the crisis, reducing growth in major
commodity exporters. North and Central Asia
had the largest decrease in economic growth;
growth fell sharply from 5.7% to -6.5%. The
negative growth rate was due to the negative
growth in Armenia, Georgia and the Russian
Federation, as all other countries in the region
had positive growth in 2009. The two other
subregions with the lowest growth in 2009 were
South-East Asia (with 4.3% growth in 2008 as
compared to 1.0% in 2009), and East and
North-East Asia (with 2.9% growth in 2008 as
compared to 0.5% in 2009). Growth in South
and South-West Asia, where economies are
largely led by domestic demand, increased
slightly from 3.4% to 3.5%. In the Pacific growth
increased from 0.8% in 2008 to 2.0% in 2009
(primarily due to an increase in the growth rate
of Australia from 1.1% to 2.4%).

Countries where domestic demand accounts for
a large share of GDP, such as China, India and
Indonesia, continued to perform robustly and
positively. The Chinese and Indonesian growth
showed a slight decline from 9.6% to 9.1% in
China, and 6% to 4.5% in Indonesia, while the
Indian economy accelerated from 5.1% to 7.7%.
China, a major exporter, was cushioned by its
relatively high proportion of domestic
investment, as well as its Government spending
programme, the second largest in the world,
together with a sound fiscal position and
accumulated reserves. Other Governments in the
region also managed to contain the depth of their
slowdowns through public spending programmes
aimed at employment creation and support of
domestic demand. The size of these programmes
depended to some extent on fiscal margins
available before the crisis.

Value added

Data on the components of production also
reflect the impacts of the slowdown. For the
exporting subregions, the average growth rate of
value added in industry was negative in 2009,
reflecting a decline in the production of industrial
products and subsequently exported. Growth in
North and Central Asia and South-East Asia was
negative in value added for industry in 2009,
after having been positive for half the prior
decade. The growth of industrial value added in
East and North-East Asia slowed significantly,
from 3.9% in 2008 to 1.7% in 2009. The 2009
slowdown also significantly impacted growth in
value added in services in North and Central
Asia, South-East Asia and East and North-East
Asia.

Investment

The global financial crisis led to significant
reductions in investment growth throughout the
region. Business outlook was circumspect and
funding became scarce during the global credit
crunch. The gross domestic investment as a
percentage of GDP was reduced across all
subregions in Asia and the Pacific. The region
thus reflected the general business concerns
around the world, contributing to the global
contraction in gross domestic investment.

Figure III.3 – Value added by sector, Asia-Pacific
subregions, 2009

However, the decline in the Asia-Pacific at 5.8%
was less than the global decline of 11% for 2009.
Additionally; in 2009, investment rates in Asia
and the Pacific were at the level of 29% of GDP
as compared to the world average rate of 21%
of GDP.

Before the global financial crisis began in 2008, many of the world’s economies recorded large trade and current
account imbalances among major trading partners. The global imbalances of the 2000s are unlikely to persist or
deepen in future. In the medium term, the balance of payments and fiscal imbalances of the United States of America
may be corrected to some extent. In such a scenario, when the buoyancy of the markets of the United States of
America and other developed countries as a destination for Asian and Pacific exports diminishes, the question for
the exporting countries will be how they might sustain their economic growth. An emerging consensus suggests
that countries in the region should rely more on domestic and regional markets to support their growth. But what
should such reorientation of growth strategy entail? And how should it be implemented?

Asia-Pacific macroeconomic imbalances are not uniform across countries and subregions. Large trade surpluses have
played an important role in supporting economic growth in East and South-East Asia, but that does not apply in
South Asia. The oft-repeated assertion that a “savings glut” is the main driving force of Asia-Pacific macroeconomic
imbalances seems to apply only in East Asia. In both South-East and South Asia, fluctuations in investment have
driven net exports to a greater degree than have savings.

Asian and Pacific countries cannot rely on blanket recommendations in addressing their macroeconomic imbalances,
such as to increase domestic consumption. How large investment fluctuations impact the imbalances should be
understood, so that boom-bust scenarios may be prevented. Appropriate policy responses should be designed with
awareness that large trade surpluses are not the only form of macroeconomic imbalance.

The Economic and Social Survey of Asia and the Pacific1 argues that the need is palpable for a regional financial
architecture to facilitate efficient financial intermediation across countries. Such architecture could improve efficiency
in preventing crises through options other than accumulating foreign exchange as Asian and Pacific countries have
done during the past decade.

1 Economic and Social Survey of Asia and the Pacific, 2011, Sustaining Dynamism and Inclusive Development: Connectivity in the Region and
Productive Capacity in Least Developed Countries, Sales No. E.11.II.F.2